A recent RBC Economics report has shown that housing affordability in Canada has hit its worst level in decades. According to the report, becoming a homeowner is less affordable now than at any time since 1990. Driving this trend were two markets in particular: Vancouver and Toronto, cities which have become notorious as of late for their high costs of living and skyrocketing real estate valuations. In this article we look at the specific crisis of today’s housing market combined with the Marxist theoretical understanding of how housing fits into the crisis of capitalism.
The current housing crisis
Both cities suffer from a severe disparity between household earnings and prices. The cost of ownership stands at nearly 80% of median household income in these cities. This ratio is more than double that of most other cities in Canada, which tend to be between 30% and 40%. In other words, to own a house or a condo in Vancouver or Toronto, an average household has to pay almost four out of every five dollars earned to service a standard 25-year mortgage, while in cities like Halifax, Montreal, Ottawa, or Calgary, to name a few, the average households can afford to spend less than half of their incomes on a mortgage. This is still a considerable share which puts home ownership out of reach for millions of hard-working Canadians in these cities, but it further highlights the utter absurdity of the situations in downtown Vancouver and Toronto, where most people have lost hope of ever being able to afford a property.
The report specifies that Toronto has recently surpassed Vancouver to become “Canada’s most overheated market.” While its prices are not as bad as Vancouver’s, they are rising at a faster rate. In Toronto, the average price of a home – a broad designation which includes detached and semi-detached houses, as well as townhouses and condos – has nearly tripled since 2000, increasing from an average price of $325,000 to $920,000. Meanwhile the average price of a detached house has soared past the million dollar mark. This in turn has helped to make housing one of the fastest-growing sectors in the Canadian economy, but also has contributed to a lack of affordability and high levels of household debt. It has gone so far that even the mainstream media and policy makers have been forced to admit that there is a problem, and that some sort of action must be taken to address it, even if none of them seem to agree on just what that action should be.
For example, Kathleen Wynne and the Liberals passed a 15% foreign buyers tax to address the problem. However, they neglected to mention that this tax, itself merely a mild deterrent, will only apply to 4.7% of Toronto real estate transactions. Bundled with a few meagre rent controls and tenant protections, this was offered as an example of ‘leadership’ in dealing with the issue. Since they are not so stupid as to believe that this symbolic gesture would actually address the root of the affordability crisis, this action in reality has exposed the Liberals’ political cowardice more than anything, their inability to confront reality on its own terms, and to put forward measures which actually begin to address the burning issues of the day. This is not to mention how it plays into xenophobia and anti-immigrant sentiment. In effect, they have responded with attention-grabbing headlines with little to no substance behind them, and awful compromises which satisfy no one and are really just designed to sidestep the issue.
Hence the Liberals have been justifiably taken to task by the opposition parties, but these other parties have offered no credible solution either. Patrick Brown and the Conservatives called on the ruling Liberals to put together a panel of “experts” on housing affordability. Once assembled, this panel would draft a new study on housing affordability in Toronto, one to be added onto the pile which only goes to reaffirm what we already know about the dire situation. This is normally the kind of bureaucratic approach which conservatives are prone to complain most loudly about liberals and social-democrats taking, yet they find it being proposed by their own party, in lieu of having a real solution to the problem. Besides this, all they have to offer is knives out for the poorest and most marginalized sectors of society, proposing to bar people from being able to access social housing unless they can pass a background check. Meanwhile Andrea Horwath and the Ontario NDP has proposed boosting investment in social housing, building new units and repairing pre-existing ones, a measure which could bring relief (depending on the level of funding), but would not address the fundamental forces which have driven up the real estate market. If the ONDP were to come to power and be able to address the issue in their way, despite their good intentions, it would not begin to provide stability to a market in which most people are increasingly being priced out.
Recognizing the size of the problem, even businessmen and bankers who have profited from the rise in prices have started to offer up ‘solutions.’ As to be expected, these amount to little more than allowing realtors and development companies to chase profits untrammeled by government regulations and tenant rights. Using the same faulty reasoning which argues that it is the minimum wage itself which causes unemployment (as if it would be rational for people to be willing to work for mere pennies per hour, were the jobs simply offered to them), they call for lower taxes and the removal of rent control in order to entice investors to build more affordable housing in Toronto. They argue that the increased profitability which would arise from the new deregulated business situation would lead to greater supply, which would take pressure off housing prices in the city. But aside from wreaking chaos on renters by stripping them of their rent controls and tenant rights, there is no reason to believe that developers would build new rental units when they can make more money building condos.
Capitalists are not satisfied to make a mere profit while greater profits and market-share are up for grabs. In fact, not pursuing the path of maximizing profits can lead a company to fold in the long run, insofar as the monopoly corporations which do exploit their every advantage can surpass and liquidate those which do not, either through buying them up or muscling them out of a given market. Logically, capitalists are compelled to pursue the line of least resistance towards the generation of profits which, as capital, can be reinvested to the purpose of accumulating ever more capital. So there is no reason to suppose that, left to its own devices, the “invisible hand” of the market could bring relief to the housing affordability crisis. Rather than investing in sustainable rental buildings, the capitalists would continue to pump disposable condos into the city as a way of turning a quick buck and passing the risks and costs associated with maintaining a building onto consumers, subletters, and small businesses.
Working in a capitalist framework, none of these parties offer a real solution for the Toronto housing crisis. Because of this, many who were thinking about one day purchasing a house or condo of their own are now wondering if they’ll ever be able to save up enough money to make a downpayment, let alone win a bidding war against the many other buyers who have crowded the market. As it stands, home ownership will remain out of reach for millions of Canadian workers who are priced out of the market, and are denied the ability to save for the future by building home equity, one of the traditional ways in which Canadian workers have been able to budget for retirement. Those who remain on the cusp of being able to afford a mortgage may also choose to wait until the market undergoes a ‘correction’ – that is, a significant drop in prices – and in doing so are forced to put their lives on hold, which can cause them to lose thousands of dollars in long-term savings. This has contributed to much frustration felt by those who are or would someday want to be prospective homeowners, along with the anxiety which comes from knowing that if prices do not in fact ‘correct’ anytime soon, they could have missed their opportunity to get into the market before it got out of range.
But potential purchasers aren’t the only ones who have been hit by the affordability crisis. Those who work hard just to make rent and afford everyday living costs are witnessing how the property bubble has taken a bite out of their budgets as well. In particular, rental fees have been climbing to keep up with house prices. Since 2016, the average rent for a one-bedroom condo climbed 8.8 percent to $1,861 per month, according to a recent report from the Toronto Real Estate Board. It is not hard to see that many of the new costs associated with property ownership will be passed along to tenants. Since landlords generally do not want to pay for costs associated with increased property taxes, insurance premiums, upkeep and maintenance costs, etc., out of their own profit margins, they will inevitably find ways to download these onto the tenants who, by most accounts, suffer most from precarious work and impoverishment than property owners. While large real estate corporations can be expected to raise rents in pitiless lockstep with the market, no matter who this might throw out onto the street as a result, pettier landlords will come up with any number of little schemes to gouge and harass their tenants to hand over more money, such as charging for utilities which were previously free, adding user fees, putting off repairs, demanding the tenants pay for repairs or do free labour to maintain the property, and threatening to evict or significantly raise the rent on tenants who do not comply with their illegal demands.
Landlordism and capitalism in theory
Because of their special position in society, landlords have sometimes been thought of as a unique or different class from the rest of the capitalists. Back in feudal times, such a distinction could justifiably be made, since the landlord class was primarily made up of nobles and clergy who were officially entitled to more rights than others. But since capitalism became the predominant mode of production in the seventeenth and eighteenth centuries, and subsequently re-made the world in its own image, the role of the landlord has been folded into the interests of the capitalist class as a whole. While they may not use their property to produce a given commodity, like the mining magnate who sells raw materials or the factory owner who sells manufactured goods, the landlord has come to be seen of as a kind of capitalist who is responsible for the reproduction of that most important ‘commodity,’ the source of surplus-value itself: the workers. Not only does housing allow the workers to reproduce themselves on a weekly basis, providing them with a roof over their heads, but it gives them a place to procreate and raise a family, thereby producing the next generation of workers to replace the older ones after they retire.
This analogy, however, only goes so far. If we extend this metaphor of the landlord as a capitalist who produces ‘humans’ any further, it begins to fall apart. This is because the renter pays a part of his earned wages to the landlord, while capitalist exploitation takes the form of being paid a wage or salary (which, for the capitalist to profit, must reflect only but a fraction of the value which each worker has created for their employers). Furthermore, humans are not mere commodities which can be bought outright, even if capitalism means that their labour-power can be purchased for a time, based on hourly schedules and the workweek. Fundamentally, humans reproduce themselves, both as adult individuals and as households with dependents. To credit the landlord with overseeing this process of ‘reproduction’ would be akin to claiming that it is Shakespeare’s landlord who was ultimately responsible for writing Hamlet.
Thus landlords, since they do not extract surplus-value from the productive activity of the working class, are somewhat different from the rest of the capitalists. (In which case, landlords are not to be mistaken with property developers or construction companies, who do generate surplus-value for their owners and stockholders.) But still they find their place in capitalism: rather than resembling the bourgeoisie, they appear more to fit in with those traders, middle-men, and retailers who seize upon their relatively small share of surplus-value through peddling tangible goods. Taking industrial production for granted, they ‘buy low to sell high,’ thereby recouping the previously invested capital and maybe pocketing a little bit on top. This trait was noticed by Engels as early as 1872, that of “the two parties confronting each other: the tenant and the landlord… [it is] the tenant – even if he is a worker – [who] appears as a man with money; he must already have sold his commodity, a commodity peculiarly his own, his labour power, to be able to appear with the proceeds as the buyer of the use of a dwelling… No matter how much the landlord may overreach the tenant it is still only a transfer of already existing, previously produced value, and the total sum of values possessed by the landlord and the tenant together remains the same after as it was before.” (The Housing Question)
Of course, landlords still must run their affairs on the basis of making a profit, of spending less than their properties can bring in. But they cannot be said to be “productive” in the capitalist sense: not only do they bring no new surplus-value into the world (with the exception of whatever they expend personally on maintenance and repairs), but they must reinvest any profits made back into their assets, insofar as “rent must not only pay the interests on the building costs, but must also cover repairs and the average amount of bad debts and unpaid rents as well as the occasional periods when the house is untenanted, and… must pay off in annual instalments the building capital which has been invested in a house, which is perishable and which in time becomes uninhabitable and worthless” (Engels). Add to this property taxes, fees, and other costs associated with managing a building, and a picture of where the landlord fits in to the capitalist system becomes increasingly apparent: filing in behind the capitalist class proper, landlords act as a reactionary reinforcement to the status quo, similar in a way to the police and the financial industry. Like these other rackets, they are paid from the spoils of those who own the means of production and thus oversee the creation of new wealth in society, via the extraction of surplus-value from the toiling masses.
No solution to housing crisis under capitalism
This is why addressing the housing crisis, inevitably, leads us to take into account the greater economic, political, and social system which defines our age. We live in the epoch of capitalism. The sorry state of affairs we encounter in the world today, in other words, is this same world of capitalism. But capitalism was not just invented yesterday. It is a product of hundreds of years of historical development which has led up to the present. The crises which defined our recent past continue to define our present. In the same way that imperialist wars, concentration camps, systemic racism, and global warming are inescapable under capitalism, the housing crisis has also been made into what it is by market forces. There is no solution to the problem within capitalism, only more of the same deadlock. There is only one means to overcome the crisis: “to abolish altogether the exploitation and oppression of the working class by the ruling class” (Engels). Only a socialist government with a socialist housing plan can meet the needs of our society. Which is to say, only through expropriating the ruling class, nationalizing the commanding heights of the economy, and workers taking the lead in establishing a genuine democracy, can we get to the root of the crisis which defines the housing question.
A socialist government would make massive investments in jobs and housing, enabling full employment and the eradication of homelessness through a national housing strategy. Additionally, a socialist government would need to meet the needs of our most oppressed and precarious workers in the immediate term. This would necessitate expropriating large-scale private rental housing buildings and unused housing stock in order to put this into circulation. As it stands, roughly 100,000 houses sit empty in Toronto, which does not begin to count empty condo and apartment units. An immediate injection of so much readily-available housing into the market would meet the needs of thousands upon thousands of Torontonians. Along with shoring up tenant rights and strengthening the economic security of millions of working people, socialists see it as irrational to allow a hyper-wealthy elite to luxuriate in opulence while millions suffer from the most basic deficiencies to do with housing, healthcare, education, and culture. Many of the mega-mansions to be found in the neighbourhoods of the Bridal Path and Forest Hill would make for good communal living arrangements, homeless shelters, healthcare facilities, campuses, or arts studios—any of which would be more helpful and productive than how they are currently employed, namely, to ingratiate the idle rich and pad the egos of spineless corporate yes-men.
Does this mean that homeownership would be outlawed under socialism? This is one of the libels which capitalists accuse the socialists of, as if every single house, stereo, and toothbrush of every single person would suddenly become the property of the state. “The expropriation of the expropriators… does not signify forcible confiscation of the property of artisans and shopkeepers,” Trotsky explained in his most important pamphlet, The Transitional Programme. He goes so far as to argue that small businesses, merchants, and artisan would benefit and even flourish “under workers’ control of banks and trusts… [since] the nationalization of these concerns, can create for the urban petty bourgeoisie incomparably more favourable conditions of credit purchase, and sale than is possible under the unchecked domination of the monopolies. Dependence upon private capital will be replaced by dependence upon the state, which will be the more attentive to the needs of its small co-workers and agents the more firmly the toilers themselves keep the state in their own hands.” The same would go for homeowners or people with small holdings, whose mortgages would be taken over by the state, fixed with low interest rates, and provided additional protections to safeguard their investments. While socialists may strive in the last instance for a society which has overcome scarcity and the use of money, it is obvious that personal homeownership, small property holdings and petty-bourgeois businesses would continue to play a role in a transitional economy for a period. Only once these forms of life are made obsolete by future advances in housing production and distribution would they lose their appeal and fade from relevance, in the same way that a socialist state would wither away under the conditions of true communism.
Until then, when it comes to the housing question, the only ones with anything to fear from the coming socialist revolution are the bourgeoisie and the big landlords. While the workers have everything to gain from adopting socialist policies in general, even many petit-bourgeois and small-scale landlords would stand to benefit through reconciling their interests with those of the working class. Only socialism can provide a future for the vast majority of working peoples. We stand for the nationalization of the land and a socialist housing strategy to reduce rents, protect tenants, expand supply, and eradicate homelessness!